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Check out a property manager before signing a deal, regulators warn

PHOENIX -- Problems with property managers are on the rise in Arizona, and the state's real-estate regulator is cautioning residential real-estate investors and renters to check out a landlord's record before they sign a contract.

Check out a property manager before signing a deal, regulators warn

Problems with property managers are on the rise in Arizona, with more than 30 sanctioned over the past year.

Problems with property managers are on the rise in Arizona, and the state’s real-estate regulator is cautioning residential real-estate investors and renters to check out a landlord’s record before they sign a contract.(Photo: Getty Images)

Problems with property managers are on the rise in Arizona, and the state's real-estate regulator is cautioning residential real-estate investors and renters to check out a landlord's record before they sign a contract.

The Arizona Department of Real Estate has issued five cease-and-desist orders against residential property managers during the past month. Since last summer, more than 30 Arizona real-estate agents and property managers have lost their licenses, been indicted by the state or told to stop handling properties for other owners.

Among the accusations: stealing rent money from owners and tenants, failing to keep accurate records for landlords and operating a management business without a license.

The business for property managers boomed in Arizona over the past few years as a record number of investors purchased homes and turned them into rentals. But not all are licensed, and even some licensed agents don't understand all the state laws regulating how rents are collected and where that money is held.

Complaints vary, from simply not having a license to fraudulent money collection.

"Investors from out of state and out of the country hired people to take care of their properties, find tenants and collect rents without checking to see if those people knew anything about property management," said Judy Lowe, Arizona real-estate commissioner. "The abuses involve a lot of homes and a lot of money from property-trust accounts."

She said some property managers are disappearing after taking money from trust accounts funded with rents and security deposits. Their departure leaves investors with big losses and no lease documents or information on who is renting their houses.

More than 100,000 Valley homes have been turned into rentals since 2009. Institutional investors have portfolios of more than 1,000 rental houses in the area. Those investors either have their own property-management firms or work with established management companies.

Arizona law says anyone who acts on behalf of another property owner and is paid to find tenants and negotiate leases must be licensed by the Real Estate Department.

Licensed real-estate agents must work under a licensed designated broker.

Reach the reporter at catherine.reagor@arizonarepublic.com.

Checklist for investors

• Make sure they are licensed. Go to azre.gov to look up real-estate licenses and recent actions against unlicensed or unethical property managers.